Daily Market Review 17 of October
Equity markets across the board closed sharply higher yesterday, as hopes for a calm and organized Spanish bailout combined with positive U.S. numbers triggered a risk on trade.

At the close of the European trade the France’s CAC 40 rallied 2.36%, while Germany’s DAX 30 surged 1.58%.

At the close of the US session the S&P500 rose 1.03%, the Dow industrial Average climbed 0.95% while the Nasdaq Composite gained 1.21%.

After the close of the US session yesterday Rating agency, Moody’s Investors Service, has confirmed Spain’s Baa3 government bond rating and assigned a negative outlook to the rating. In addition, Moody’s has confirmed Spain’s short-term rating at Prime-3. This enouncement came as a surprise to the market that priced in yet another rate cut to Spain’s sovereign debt.

This positive news coupled with the strong US earnings gave strength to the Asian exchanges this morning. The Japanese Nikkei rose 1.22%, Hong Kong's Hang Seng gained 1.02%, South Korea's Kospi rose 0.68% while China's Shanghai Composite edged higher by 0.29%.

Today’s Financial Calendar:

08:30    UK        Bank of England Minutes               
08:30    UK        Claimant Count Change (Sep)       
08:30    UK        Average Earnings including Bonus (3Mo/Yr) (Oct)       
08:30    UK        ILO Unemployment Rate (3M) (Jul)       
08:30    UK        Claimant Count Rate (Sep)   
09:00    CH        ZEW Survey - Expectations (Oct)    2           
09:15    UK        BOE Deputy Governor Paul Tucker speech

The third quarter earning season is gaining momentum. Among the key reports today before the opening session in the US; Bank of America, Halliburton, Abbott Labs, Pepsico.

EUR/USD The Euro rallied yesterday to above the 1.30 Psychology mark follow Moody’s enouncement and increasing speculation of a possible bailout for Spain. We have long believed that despite the denials by Spanish officials, a bailout is inevitable and will most likely occur after the October 21st regional elections.

According to Dow Jones, a Spanish official said Monday night they would prefer to 'apply for a credit line, a request that the ESM make more money available if needed.' The reason why the Spanish government likes the idea of a credit line is because it would provide a backstop to Spain without having the same stigma as a full scale bailout.

Technicals:

Resistance; 1.3171, 1.3280, 1.3380
Support; 1.3071, 1.3000, 1.2876, 1.2820

Overall sentiment; Bullish